San Diego Estate Planning Lawyer Blog

Sometimes a trustee of a trust has to be removed for a violation of his fiduciary duties. In California the Probate Code sets forth the various duties a trustee of a trust has to the beneficiaries. Some of these duties are the duty of loyalty, duty not to self deal, the duty to keep the beneficiaries informed, duty to act impartially, and the duty to use skill and care in administering the trust.

You may recall the late Dr. Atkins, the author and physician who created the Atkins diet. When he died in 2003, he left 90% of his estate to a Marital Trust for the benefit of his wife Veronica and the balance to his charitable foundation. Dr. Atkins had named three business associates to serve as co-trustees with his wife. The three business associates resigned their trusteeship within 9 months of Dr. Atkin’s death and were replaced with individuals who were named as beneficiaries in Veronica Atkins estate planning documents. Agreements were entered into with these co-trustees agreeing to pay them millions of dollars for trust administration. Mrs. Atkins was obligated to pay her co-trustees a minimum of $100,000 per month. In the first six months, two of the trustees were paid more than $1 million in fees. When Mrs. Atkins stopped paying them, they sued her for breach of contract.

Finally in 2007, Mrs. Atkins filed a petition to remove her co-trustees in a New York probate court. New York has similar codes to California which allow a trustee to be removed if they engage in a breach of their fiduciary duty or if hostility between the co-trustees or the trustees and the beneficiary impair the administration of the trust. In ruling that the trustees should be removed, the Court said when the trustees are chosen by the testator, the court is reluctant to remove a trustee but there was a clear showing of misconduct and a level of hostility between Mrs. Atkins and her co-trustees such it would affect the trust administration.

At Scott C. Soady, A Professional Corporation, we frequently have to petition the local probate court to remove a trustee or conversely, defend a client who is acting as a trustee and the beneficiaries are seeking to remove him. In either case, it is the type of trust litigation that requires you as a potential client to seek out experienced counsel. Contact us about probate or trust litigation or trust administration.

Your friend or parent has asked you to be the successor trustee of his trust. Is there anything you should ask before accepting such a responsibility? Yes, yes, yes. You may think that being asked to handle someone's estate is not that hard but sometimes being a trustee can be aggravating, frustrating, time-consuming, and even lead to litigation.
Money Magazine has a good article about the warning signs that, if present, may make you want to think twice about accepting a trusteeship. Here are some of the red flags:

1. You are being left in the dark. Before you agree to be a trustee and administer a trust, you should know the facts. Review the trust and see what is involved. If the trustor is asking you to be his successor trustee but won't provide a copy of the trust, you may not want to take on such a task without being informed.

2. Someone who is an heir is being disinherited. Disinheriting someone who is a natural beneficiary such as a child can cause hard feelings and increase the likelihood of litigation which you will have to defend as the trustee. Inequitable distributions are likewise more likely to cause problems than if the beneficiaries are all treated equally, such as where three children of the Trustor split the estate equally.

3. There is already tension in the family. Managing a trust where the family members don't get along anyway can be difficult. One of the ways this can happen is where there is an A/B trust or bypass trust which can pit the children of a Trustor against a surviving spouse who is not their mother.

4. You are being asked to manage a relative's inheritance in trust. Most of the time, the successor trustee will be distributing the assets outright to the beneficiaries. Sometimes however, a trustor provides that the money be held in trust until a particular beneficiary is a certain age. The trustor may make another child the trustee and therefore in charge of investing and managing the assets in trust until the beneficiary is of the age to receive the entire estate. Putting one child in control of another child's inheritance can be a difficult situation.

If after being informed of what trust administration would involve, you decide to agree to be a trustee, one way to make your job easier is to get the assistance of an experienced estate planning lawyer who handles trust administration. At Scott C. Soady, A Professional Corporation, trust administration is a large part of our practice.

The recent case of Estate of Stoker, decided in a California Appellate Court, involved an interesting way one person revoked his living trust.

Steven Stoker signed a will in 1997 in which he left the bulk of his estate to the Steven Stoker Revocable Trust, which he created at the same time as his will. His girlfriend Destiny Gularte was named the successor trustee and the beneficiary.

Several years later, Steven and his girlfriend had an argument and separated permanently. Steven did not do anything to formally amend or revoke his trust. He did however have a friend write out a new will which Steven dictated and signed, revoking his 1997 will and leaving everything to his two children, not the girlfriend. Steven signed the will in front of two witnesses but did not have them sign the document. He then urinated on his original will of 1997 and set it on fire.

When Steven died, a probate judge had to decide which will was valid, ie. had the 2005 will revoked the 1997 will and trust? The judge allowed extrinsic evidence to determine whether Steven had the intent to revoke his prior trust. He heard testimony from the witnesses and ruled that the later 2005 will expressed Steven’s actual wishes even though it lacked witness signatures.

This case highlights two points:
1. Make sure you amend your will or trust when circumstances change. If you get a divorce or separate from someone you named in your will or trust, it’s time to make revisions to your estate plan. Likewise, if someone you named as a beneficiary has died, you may also want to make changes.

2. Once you decide you want to make changes to your estate planning documents, call an experienced estate planning attorney to help you execute the appropriate documents. What Steven Stoker did is not recommended.

If you want to make changes to your will or trust or want to revoke such documents in favor of new estate planning documents, you want to do it in an appropriate manner. The estate planning lawyers at Scott C. Soady, A Professional Corporation can help you with that or any other estate planning concerns.

In today’s high tech world, it’s difficult sometimes to get through to a human to address your concerns when you call the bank, the cable company, public agencies, etc. Sometimes you feel like there is no live person who is working there. Now there is a website, GetHuman.com. which tells you the numbers to press or the words to say to reach an operator.

There are more than 2000 companies listed on the website from AT&T to Zappo’s. With many companies you can reach an operator by just dialing 0, however that is not always the case. To reach an operator at Master Card, for example, you have to press 0 three times. At Greyhound Bus Lines, you have to press 26. There are many companies who actually have humans answering the phone and there are also a couple of companies on the list that say you cannot reach a human to talk to.

The website also has user reviews for customer service lines, including the average wait time. At Facebook, for example, it can take from 1-2 hours to get to talk to a live person. Verizon Wireless gets a good customer service rating with an average 4 minute wait time. To reach a live person at Verizon, press # and then 0.

Talking to a human is also important in estate planning. There are a number of web sites that will help you prepare a revocable living trust or a will. There is also software you can purchase to help you draft an estate plan. But who will answer the questions as to what type of trust you need, how to effectively disinherit an heir, how to leave someone a life estate in a home, or how to provide for charities. That is why meeting face to face with the attorney who drafts your estate planning documents is so important. You can always meet with the attorneys at Scott C. Soady, A Professional Corporation about your goals and wishes. You can also call the office and talk to a human as your estate planning documents are prepared and as time goes on, to update your documents, or address any other estate planning issues.

An appraisal is a professional's estimate of the value of one's property. The item to be appraised can be a small item like a piece of jewelry or something larger, like a residence or office building. Appraisals play a role in various aspects of estate plannng.

When someone dies with a will, the person designated as the executor will petition the Probate Court to administer the estate. When someone dies without a will, there is also a Probate opened and a family member or friend of the decedent is appointed the administrator of the estate. In both cases, the personal representative (executor or administrator) must file and Inventory and Appraisal describing all the assets and placing a value on them. Then a probate referee appraises all of the assets as of the date of death. Real property is appraised, personal property is appraised, and other assets are valued. Different types of assets may require appraisers with different expertise. For example, if the estate contains valuable artwork, an appraiser experienced in that type of art will be used to do the appraisal. Antiques also require a special appraiser as do coin collections, stamp collections, and other collectibles.

When a person dies with a trust, their trustee will be administering the trust and distributing the assets to the beneficiaries. Appraisals may also be necessary. The Trustor’s real property has to be appraised as of the date of death and similar to probate administration, jewelry, artwork, collections, and personal property and household furnishings have to be valued and sometimes requires appraisers of various types. Assets such as checking accounts, savings accounts, stocks, mutual funds, and other investments are valued at whatever their value was as of the date of death.

Sometimes married couples have trusts known as A/B trusts, marital deduction trusts, by pass trusts or other types whose common characteristic is that the trust must divide into two or more trusts after the death of the first spouse. All of the trust assets have to be appraised and valued and then allocated into one trust or the other.

Other situations where appraisals may be necessary are for federal estate tax returns or gift returns. The IRS may require appraisal reports to support values claimed on estate or gift tax returns. Also in conservatorships, once someone has been appointed as conservator of a person’s estate, he must file an Inventory and Appraisal similar to that required in probate.

The estate planning attorneys at Scott C. Soady, A Professional Corporation can assist you with finding the right appraiser for whatever type of property has to be appraised in probate or trust administration or for a conservatorship. Call us for more information.

As the successor trustee of a trust, executor of a will, or the administrator of an intestate estate (ie. no will or trust), one of your duties will be to pay all taxes due the federal government and the state of California.

Personal Income Tax Returns Once someone has died, a personal income tax return will have to be prepared and filed for the year of the decedent’s death. Income received by the decedent from January 1 until the date of death will have to be reported. If the estate receives income however, after the date of death, that will be reported on the estate tax return. Deductions for medical expenses of the decedent can be taken for one year after the date of death, to take into consideration expenses of a last illness. All other deductions, such as for mortgage interest, property taxes, etc. must have been expenses incurred prior to the date of death.

Fiduciary Tax Return The estate income tax return, call a fiduciary tax return, is filed annually as long as the estate is open. Dividends, interest, capital gains, and rents are all reported on this return. Deductions can be taken for mortgage interest the estate pays on real property and legal and administrative fees. This return, unlike the personal return, can be filed on a fiscal year basis. The duty to file a fiduciary return exists as long as the trustee, executor, or administrator is administering the estate. The final fiduciary return can be filed when the estate is in a position to be closed and final distributions made to beneficiaries.

Estate Taxes If a person dies in 2011 with over $5 million in assets, an estate tax return also has to be filed within 9 months of the date of death. Extensions for 6 months can be obtained. If there are gifts to qualified charities, those can be deducted as can debts of the decedent such as funeral expenses, last illness medical expense, and legal fees. The current federal estate tax exemption is $5 million which will last until 2013. Congress can act before that date to keep the exemption at the current rate or to change the exemption Keep in mind that it is the federal estate tax exemption in the year of death that governs.

Other Taxes Another type of tax that will have to be paid by the trustee, executor, or administrator of an estate is property taxes if the estate owns real property. A gift tax may also be necessary if the decedent made gifts in excess of the gift allowance for the year of death.

To help you with tax issues, the attorneys at the Law Office of Scott C. Soady, A Professional Corporation will work with the decedent’s CPA or the trustee, executor, or administrator’s CPA. We also have CPA’s we can refer you to for assistance with tax issues. It is an extremely important that all tax issues are handled competently and efficiently since there may be substantial penalties and interest that may be incurred if not handled correctly.

A simplified probate procedure may be possible with a spousal property petition. Such a petition can be used to transfer assets from the deceased spouse to the surviving spouse or domestic partner without the time and cost of a formal probate.
The spousal property petition can be used if the decedent had a will and the only beneficiary was the surviving spouse or domestic partner. If other beneficiaries are named in the will, however, this procedure cannot be used and a formal probate will be necessary to transfer the assets to all the beneficiaries. If the decedent died without a will, leaving only a surviving spouse or domestic partner, the procedure can also be used. The property is distributed in accordance with the laws of intestate succession. Community property will be transferred to the surviving spouse or domestic partner through the spousal petition. Separate property, if there is any, will have to be distributed through formal probate. If there is property in joint tenancy, that will be distributed to the joint tenant without any probate.

The surviving spouse or domestic partner files a petition with the Probate Court setting forth the facts as to why he or she is entitled to the community property, listing the property to be distributed, the decedent’s date of death, date of marriage, etc. A court hearing is set in the probate court after notice is given to everyone mentioned in the will and the heirs of the decedent. If the court grants the petition, the order is then recorded with the County Recorder in each county where there is real property. Copies of the order may be used to show financial institutions and investment companies to complete the transfer.

The spousal property petition is a good way to distribute community property to the surviving spouse when the only assets to be distributed are community property. One big advantage is that the cost of such a petition is much less than a formal probate. There are some reasons however, why the spouse may not want to take advantage of the spousal property petition. One reason might be that there are creditors who will be making claims, or it is likely that there will be a will contest, or litigation. Also if the decedent created a trust, there is no reason to use the spousal property petition or probate at all. Trust administration is usually done without the assistance of the probate court.

The estate planning lawyers at Scott C. Soady, A Professional Corporation can assist with determining if a spousal property petition would be available for you. If you have lost a spouse and need information about trust administration or probate, contact us for a complimentary consultation.

If the value of an estate is less than $100,000, California law provides a way to transfer the assets of the decedent without formal probate. The procedure is outlined in Probate Code section 13100, a process sometimes called a “small estate affidavit.” This method can be used to distribute assets such as cash accounts, stock, bonds, personal property, or even real property if valued below the limit.

How do you calculate whether the estate is valued at less than $100,000? The assets of the decedent that must be counted are bank accounts, brokerage accounts, stocks, bonds, mutual funds, real property, other investments, and personal property. Assets that you don’t have to count are property in joint tenancy, assets held in trust, IRAs, 401(k)s, and other pension plans, life insurance proceeds, automobiles, and payable on death (POD) accounts.

What is required to transfer assets? The process requires an affidavit with information about the gross value of the decedent’s real and personal property, the allegation that the decedent’s assets do not exceed $100,000, and that 40 days have passed since the decedent’s death. The person completing the affidavit, the “affiant” must also allege that there has not been a probate administration, must describe the property to be transferred and allege that the affiant(s) are the persons entitled to the property as the beneficiaries under a will or because they are heirs of the decedent who had no will. The affidavit must be signed under penalty of perjury and notarized. Sometimes banks or companies which hold stock will also require that the beneficiaries or heirs get their signatures guaranteed by a medallion. The affidavit and other paperwork is sent to the institution that holds the assets who then transfer the assets into the names of the beneficiaries or heirs.

The small estate affidavit procedure should not be used when there are significant assets in the decedent’s estate (more than $100,000) or where there is significant debt. The procedure should also not be used there the estate is insolvent or close to insolvent because the estate can benefit from the creditors’ claims procedures available with ordinary probate. Ordinary probate may also be necessary if the beneficiaries or heirs dispute how the property should be distributed.

For other questions about California probate, contact us at Scott C. Soady, A Professional Corporation. We can answer all your probate questions and guide you through probate or one of the summary probate procedures.